Good News: Almost No EVs Will Qualify For The Tax Credits

This is what happens when you neither read nor understand the legislation you’re voting for, when you’re just desperate to Do Something and do not really consider that it actually has to make sense, not just be a Talking Point

The climate bill could short-circuit EV tax credits, making qualifying for them nearly impossible

The U.S. Senate passed a far-reaching climate, energy and health care bill on Aug. 7, 2022, that invests an unprecedented US$370 billion in energy and climate programs over the next 10 years – including incentives to expand renewable energy and electric vehicles.

Rapid and widespread adoption of electric vehicles will be essential for the United States to meet its climate goals. And the new bill, which includes a host of other health and tax-related provisions, aims to encourage people to trade their gasoline-fueled cars for electrics by offering a tax credit of up to $7,500 for new electric vehicles and up to $4,000 for used electric vehicles through 2032.

But there’s a catch, and it could end up making it difficult for most EVs to qualify for the new incentive.

A catch? The hell you say!

The bill, which needs House approval, requires that new electric vehicles meet stringent sourcing requirements for critical materials, the components of the battery, and final assembly to qualify for the tax credits. While some automakers, like Tesla and GM, have well-developed domestic supply chains, no electric vehicle manufacturer currently meets all the bill’s requirements.

Wait, what was that final line? “no EV manufacturer currently meets all the bill’s requirements.” Huh. That’s what you would call a Class 1 Fuckup.

The problem is that the Inflation Reduction Act’s sourcing requirements come online so quickly, starting in 2023, and ratchet upward so rapidly, that the plan could backfire. Instead of expanding electric vehicle adoption, the policy could make almost all electric vehicles ineligible for the tax incentives.

The bill excludes incentives for any new vehicle which contains battery materials or components extracted, processed, manufactured or assembled by a “foreign entity of concern” – a category which includes China.

Whoops. At least 40% of the battery components must come from the U.S. or a nation we have a fair trade deal. China controls somewhere between 60-80% of the market at this time, and are producing 76% of the world’s EV batteries. (that info via Reason)

Although EV manufacturers are already pursuing plans to develop supply chains that meet these sourcing requirements, proposals for mines and processing facilities often face challenges. Indigenous and environmental concerns have slowed a proposed lithium mine in Nevada. In some cases, key materials, such as cobalt and graphite, are not readily sourced domestically or from fair-trade allies.

Double whoops. And, seriously, do you think there won’t be lawsuits left and right if the federal government even greenlights domestic mining? The hardcore enviroweenies won’t allow it. And, if it looks like it has a chance of going forward, they will do anything from mass protests at the site to performing illegal acts.

(Reuters) Democratic Senator Debbie Stabenow of Michigan told Reuters on Tuesday: “It’s a very cumbersome, unworkable credit once the full restrictions set in. There’s conversations going on.”

Perhaps you should have thought of this before jamming the legislation through.

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4 Responses to “Good News: Almost No EVs Will Qualify For The Tax Credits”

  1. Hairy says:

    “Current” is the key word
    This is to encourage EV car parts to be made here.
    You know, buy American.

    • Dana says:

      How long, one has to ask, will it take form those manufacturing plants to be built? Had you really read our esteemed host’s article, you’d have noticed that local Indian tribes and environmentalist whackos are fighting a lithium mine startup in the Silver State, and while a decision on their lawsuit is expected in September, we all know that they’ll immediately file an appeal if they lose.

      So, with the tax credits to help people buy the plug-in electric vehicles mostly not available, the subsidies can’t do as promised . . . and projected sales of the things will not match what is hoped. This will be a disincentive for private automobile manufacturers to invest more to build them.

      Let’s face facts: the tax credits were just welfare for the well-to-do, as most Americans can’t afford to buy new cars, but are stuck with the used car market. I am amused, however, that the well-to-do won’t be able to use them, since no cars will be eligible!

  2. joe says:

    read something yesterday on the tax credits…basically if you paid $7500 in taxes, you would get the $7500…if you paid $3500 you might get the $3500 back…doesn’t matter, the damn things will burn your house down when they catch on fire charging in your garage…

  3. UnkleC says:

    As Dana and Joe have pointed out, tax credits only work if you actually pay taxes and then only up to the limit of the credit. Tax credits do absolutely nothing for the 50% or so that don’t pay federal income taxes. There are your lefties taking care of the poor again who will remain poor and doing their car shopping at the ‘Buy Here-Pay Here’ lot selling over priced clunkers.

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